Chevron Corp. raised its annual rate of share buybacks in a show of confidence in its cash generation targets, even after crude oil prices declined more than 30% since June.
Chevron will buy back shares at a rate of $17.5 billion annually starting in the second quarter, up from $15 billion previously planned, the San Ramon, California-based company said in a statement on Tuesday. The top end of its buyback target range rose by a third to $20 billion a year, giving Chevron room for further increases in the future.
CEO Mike Wirth is eager to show that the cash returns promised to shareholders last year when oil soared to more than $100 a barrel are sustainable despite today’s much lower crude prices. Earlier today, analysts questioned whether America’s No. 2 oil company has enough production growth in its existing portfolio to keep generating the cash needed for shareholder payouts.
Chevron sought to ease those concerns by promising 3% annual production growth, with nearly 900,000 barrels a day added from the Permian Basin, Kazakhstan, the Gulf of Mexico and elsewhere by 2027. The Permian will lead the charge with half of the expected increase while TCO, its main Kazakh operation, will also provide significant new production when its future growth project becomes operational in 2025.
That growth will come despite a flat capital budget, with annual free cash flow rising more than 10 percent at Brent prices of $60 a barrel, Chevron said. Shares rose 1.3% in premarket trading in New York, as Brent rose.
US President Joe Biden has repeatedly criticized Chevron and its rivals for what he says is excessive spending on buybacks following Russia’s invasion of Ukraine. The administration has called for more investment in oil production, to increase supply and lower prices.
But Wirth and the U.S. oil industry have pushed back, arguing that production is rising and, in any case, shareholders are entitled to higher payouts after a decade of poor stock market returns.
Chevron shares have fallen 9.3% this year, compared with a 3.7% drop in the S&P 500 energy index. The company recently withdrew its growth targets this year for the Permian Basin, in part due to weaker-than-expected oil well performance. Chevron still expects the largest U.S. shale basin to be the cornerstone of its medium-term growth. Production will rise more than 35% to nearly 1.2 million barrels of oil equivalent per day in 2027, he said.
